Auto Expenses

Almost every business needs to have the employers or employees travel.  Much of this travel is done by automobile.  Both employees and self-employed individuals can deduct expenses associated with this type of travel.  The important thing to remember is to keep good records so that the deductions can be substantiated later if need be.

Self-employed taxpayers can either take actual operating expenses (gas, oil, insurance, repairs, depreciation and other costs) or take the standard mileage rate, which for 2003 is 36 cents per mile.  The standard mileage method is a simpler method since it does not require the need to keep receipts every time you fill up your car.  However, it is strongly advised to keep a mileage log each year documenting where the person goes on business, the total mileage per trip and the business purpose of the trip.  It is also helpful to have the odometer reading at the beginning and end of each year to determine the percentage used for business.  If you use the standard mileage method in the first year the vehicle is used for business it is considered an election to exclude the car from depreciation expense (which is used with actual operating expenses).  The standard mileage rate is not available to taxpayers who operating more than one vehicle at a time (fleet) or vehicles used for hire (taxicabs).

Employees can use either method for automobile expenses related to their employment which are not reimburse by their employer.